The 58th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, is set to take place today and tomorrow, with a focus on GST reforms. The meeting aims to simplify the current four-tier GST system, which includes rates of 5%, 12%, 18%, and 28%, into a two-slab structure with rates of 5% for essential goods and 18% for non-essentials. An additional slab of 40% is likely to be introduced for “sin goods” such as tobacco and luxury cars.
The proposed changes are expected to benefit various industries, including consumer goods, auto, and textiles. The GST rate on essential items such as toothpaste, shampoo, and soaps is likely to be reduced from 18% to 5%. Similarly, the GST rate on butter, cheese, and ready-to-eat foods may be reduced from 12% and 18% to 5%. The rate on consumer electronics such as TVs, ACs, and refrigerators is likely to be reduced from 28% to 18%.
The auto industry is also expected to benefit from the proposed changes, with the GST rate on small petrol cars and small hybrid cars likely to be reduced from 28% to 18%. However, electric car makers may face a hike in GST rates, with a proposed increase from 5% to 18% for electric cars priced between ₹20-40 lakh. The two-wheeler industry is also likely to benefit from a reduction in GST rates from 28% to 18%, although the GST Council may propose a 40% tax on two-wheelers with engine capacity higher than 350 cc.
The proposed GST rationalization aims to achieve structural simplification, enhanced ease of doing business, revenue neutrality, and compensation mechanisms. The simplification of the GST system is expected to reduce litigation, streamline administration, and offset losses from lower slabs. The GST Council is also expected to discuss mitigating duty inversion, where input services are taxed higher than outputs, to ensure that consumers benefit from the proposed changes. Overall, the proposed GST reforms are expected to have a significant impact on various industries and consumers, and the outcome of the 58th GST Council meeting will be closely watched.